Foreign Relations of the United States, 1946, General; the United Nations, Volume I

Lot 54–D361E, Box 328

Excerpt From Department of State “Current Economic Developments”⁷⁶

July 29, 1946

secret

[Here follows discussion of subjects not related to the “Suggested Charter”.]

Draft of ITO Charter Approved by ECEFP. The Executive Committee on Economic Foreign Policy has approved a suggested draft of a Charter for an International Trade Organization of the United Nations. This draft represents an elaboration of our recommendations contained in the trade proposals (see page 1, July 23, 1945 issue and page 2, December 10, 1945 issue of Current Economic Developments) and is to be transmitted to the other governments members of the Preparatory Committee to serve as a basis for discussion. Present plans call for publication of the Charter, together with an analysis, in September.

Purposes. The purposes of the ITO are stated to be: (1) to promote solution of problems in international commercial policies and relations through consultation and collaboration; (2) to enable members to avoid measures destructive of world commerce by providing expanding opportunities for their trade and economic development; (3) to assist the industrial and general economic development of member countries, especially those in the early stages of industrial development; (4) in general, to promote national and international action for the expansion of the production, exchange and consumption of goods, for the reduction of tariffs and other trade barriers, and for the elimination of all forms of discriminatory treatment in international commerce; thus contributing to an expanding world economy, to the establishment and maintenance in all countries of high levels of employment and real income, and to the creation of economic conditions conducive to the maintenance of world peace; and (5) to provide a centralized agency for the coordination of the work of members to the above ends. The original members will be those agreeing to the charter at the world trade conference, membership also being open to other countries accepting the provisions of the charter, subject to the approval of the conference.

Employment Provisions. Recognizing that maintenance of useful employment opportunities for those able, willing and seeking to work is essential to full realization of the purposes of ITO, each member agrees to take action to achieve and maintain full employment within its own jurisdiction, and in doing so will refrain from adopting measures which would create unemployment in other countries. ECOSOC will supervise the exchange of information and consultation on employment problems.

General Commercial Provisions. With respect to customs duties and internal taxation, general most-favored-nation treatment is called for among all members of ITO, except that this shall not require automatic elimination of any preference in customs duties which does not exceed that in force on July 1, 1939, and which falls into one of the two categories: (a) preferences in force exclusively between territories having on July 1, 1939 a common sovereignty, or (b) preferences in force exclusively between the US and Cuba. No preferences shall be increased above their level on July 1, 1946 and all shall be subject to processes of elimination. National treatment on taxation, and freedom of transit for products of any member country in any other member country are called for and limits are placed on antidumping and countervailing duties.

The members undertake to work toward the standardization of valuation of products for tariff purposes and accept certain general principles with regard thereto. Members agree that subsidiary fees and charges in connection with importing and exporting should be limited to the approximate cost of services rendered and not represent indirect protection; most-favored-nation treatment with regard to marks of origin is called for; and certain products will be exempt from marking requirements. Members agree to make available promptly to ITO such statistics relating to their foreign trade as the Organization deems necessary, and to discourage boycotts of products of other member countries.

Tariffs and Tariff Preferences. Any member at the request of another will enter into mutually advantageous negotiations for the reduction of tariffs and the elimination of tariff preferences. Prior international commitments shall not be permitted to stand in the way of action on tariff preferences. All negotiated reductions in most-favored-nation import tariffs shall operate automatically to reduce or eliminate margins of preference, so that, in respect of any product on which the most-favored-nation rate of duty is reduced, or bound against increase, the margin of preference which may apply to such product may not exceed the margin by which the most-favored-nation rate exceeds the preferential rate as of July 1, 1939.

Quantitative Restrictions. Prohibitions and restrictions on imports or exports are abolished except for (a) restrictions imposed during the early post-war transitional period to provide equitable international distribution of short supply items or the orderly liquidation of temporary government-controlled stocks; (b) export restrictions temporarily imposed because of severe shortages of foodstuffs or other essentials; (c) restrictions necessary to the application of standards for the classification and grading of commodities in international commerce; (d) quotas imposed under inter-governmental commodity agreements provided for in the Charter; (e) import restrictions on agricultural products necessary to enforce governmental measures to (i) restrict the quantities of the like domestic product permitted to be marketed, or (ii) remove a temporary surplus of the like domestic product by making the surplus available free or at prices below the market level to certain groups of domestic consumers. Subject to certain conditions, however, any member confronted with an adverse balance of international payments may impose import restrictions. With certain exceptions, quantitative restrictions so imposed must be non-discriminatory.

Exchange Control. To avoid imposition of trade restrictions through exchange techniques, members agree not to impose exchange control on commodity transactions with other members, except where this is permitted in the Articles of Agreement of the International Monetary Fund. However, members agree to relinquish their freedom of action to impose exchange restrictions on commodity transactions under Article XIV of the Fund (post-war transitional period).

Subsidies. Members undertake to notify the ITO of any subsidy to domestic producers of any product and to discuss with other members the possibility of limiting such subsidization if it is found seriously injurious to the trade of any member. Export subsidies would in general be prohibited after a transitional period.

State Trading. State trading enterprises shall accord to the trade of all members nondiscriminatory treatment, as compared with the treatment accorded to the commerce of any country other than that in which the enterprise is located. Such enterprises shall be influenced solely by commercial considerations in making external sales or purchases. State monopolies of individual products shall undertake to reduce margins of protection accorded to domestic producers and complete state monopolies of foreign trade shall negotiate with the other members an arrangement by which, in return for tariff concessions, the state monopoly will undertake to import over a period products of other members to an agreed value.

Emergency Provisions. An escape clause permits withdrawal or modification of any tariff or other trade-barrier concession which proves to threaten serious injury to domestic producers for such time as may be necessary to prevent this injury. However, previous notice in writing must be given the ITO and penalties are provided in cases of abuse.

Restrictive Business Practices. Members agree to take appropriate individual and collective measures to prevent business practices among commercial enterprises which restrain competition, restrict access to markets, or footer monopolistic control in international trade. The ITO will receive and consider written complaints from any member, persons or organizations that a particular practice has this effect. If the complaint is found justified, the ITO will recommend appropriate remedial measures. The ITO may request information from members and conduct studies relating to restrictive business practices and where appropriate make recommendations for action by the members.

Intergovernmental Commodity Arrangements. When special difficulties exist or are expected to arise concerning a particular commodity, members and possibly non-members substantially interested in the commodity shall be entitled to appoint representatives to a Study Group to make a study of the commodity and recommend to the ITO how to deal with such difficulties. The ITO may call an intergovernmental conference to frame an intergovernmental commodity agreement in accordance with certain principles: (a) any member with a substantial interest in the production, consumption or trade of the commodity may participate in the consideration of the proposed agreement and non-member countries may be invited to do so; (b) members agree not to enter into intergovernmental commodity agreements except after investigation by the Study Group of causes of the problem and determination that a burdensome surplus exists which would cause widespread distress to small producers accounting for a substantial portion of the total output, or that widespread unemployment, unrelated to general business conditions, is developing in the industry concerned and cannot be corrected by the normal play of competitive forces. Members must also first adopt a program of economic adjustment to insure progress toward solution of the problem within the time limits of the agreement; and (c) agreements relating to other than primary products shall not be resorted to except in exceptional circumstances. Agreements are not to remain initially in effect for more than five years and renewal will be subject to the principles governing new agreements. A Commodity Council is to be established under each agreement with equal voting power to be given to importing and exporting countries.

Organization. The organization, as was called for in the Proposals, will have a Conference, an Executive Board, a Commission on Commercial Policy, a Commission on Business Practices, a Commodity Commission and a Secretariat. An Interim Tariff Committee is also provided for to act temporarily on behalf of the ITO in investigating a complaint of a member that another member has failed to fulfill its obligations to conduct tariff negotiations. The Charter provides in detail for membership in these groups and the duties of members.

76. “current Economic Developments” was a classified weekly publication prepared by the Policy Information Committee, Department of State, for the information of the Foreign Service of the United States. It was designed to highlight developments in the economic divisions of the Department and to indicate the economic problems that were receiving attention in the Department at any given time. This extract is taken from Issue No. 58, July 29, 1946, and is being printed here for purposes of convenience.